Manchester United’s Steve Bruce, left, and Bryan Robson lift the new Premier League trophy at the end of the inaugural 1992-1993 season.
Photograph: David Cannon/Getty Images

Rick Parry is showing me the most important document in the recent history of British sport. He has a photo of it on his phone. “Here it is in my handwriting,” he says. “Graham was upstairs, waiting for me to tell him, and I’d forgotten to put FA. So that’s Graham’s writing on the top going ‘by the way, that’s the FA Premier League’.”

“Graham” is Graham Kelly, the former chief executive of the Football Association. In 1991 he hired Parry to help him with a problem. Out of that problem was born a football competition that has become a global brand, a sporting hegemon and a form of soft power for the United Kingdom in the 21st century. But visible even in its totemic “founders’ agreement”, the document on Parry’s phone, were the tensions that would make the Premier League sometimes as reviled as it was beloved.

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The Premier League turns 25 this summer and there is much to celebrate. It is by far the most popular national football competition in the world, watched avidly on television by fans in 210 countries. At home, capacity crowds attend fiercely competitive matches in brand new stadiums, largely free from disorder or disruption. The competition has dozens of star players, almost all the most famous managers, and creates enough drama to feed a relentless media appetite. It is also, again by far, football’s richest competition, generating £4.865bn in revenue during the 2015-16 season, according to the financial analysts Deloitte.

The story of how the Premier League came into being is one of determination and deceit, of clubbable bureaucracy coming face to face with free-wheeling entrepreneurialism. In effect it is a story of its age, the late 1980s and early 1990s, when Thatcherism had smashed post-war orthodoxies but created little in its place. Football, the national game, was on its knees: stigmatised as a crucible for hooliganism, grieving after the tragedy of Hillsborough. The sport was loathed by government and struggling to make ends meet. Yet a great opportunity was approaching and a small number of ambitious men were ready to seize it.

First among those men were Greg Dyke and David Dein. Dein was then deputy chairman of Arsenal, one of the Big Five, the clubs with the most storied heritage and the greatest crowds in English football (the other four were Manchester United, Liverpool, Everton and Tottenham Hotspur). Dein was fascinated by the high-rolling razzmatazz of American sport and frustrated by the endless sub-committees of the Football League, the competition to which his club then belonged. Dyke, meanwhile, was at that time both chief executive of London Weekend Television and the chairman of ITV Sport and liked watching football almost as much as he liked doing deals.

The two men, who remain good friends, had first met in 1988 at a fashionable Japanese restaurant called Suntory. Dyke wanted to show the Big Five’s matches on ITV and offered to buy their rights separately from the rest of the 22 clubs who formed the League’s elite First Division. If such a plan were to have come to pass it would in effect have amounted to a breakaway competition.

The Football League found out about the discussion and went into conniptions; so desperate were they to prevent such a deal they sold TV rights to the entire First Division for four years on terms that suited both broadcaster and clubs. ITV could show matches at a new time of 5pm on Sunday and the clubs got to keep 75% of the money, rather than sharing 50% with lower league clubs as had previously been the case.

“That year I bought the whole of the Football League for the cost of one match now. And I got shit for it at ITV for paying too much,” says Dyke, now in a fashionable “kitchen” in Soho. When the deal began to approach its end the Big Five were keen to make more money still but Dyke did not believe it was possible. “I had a dinner at LWT with the Big Five and I said: ‘We’re not going to get this deal again. The League are better organised. We’re not going to get the same deal, so what are we going to do?’

“David Dein said: ‘It’s time to break away.’ They were going to break away and had worked out that the absolutely crucial element of this was the FA. If they could get the governing body on side, then they could do it.”

In most of the conversations that helped inform this article, the word most commonly used in relation to the Football Association was “tragedy”. The Premier League could not exist without the FA, it is registered at companies house as the Football Association Premier League, and yet the parent exerts almost no control over the child.

As evinced by Graham Kelly’s amendment to the founders’ agreement, the parentage was uncertain even at its conception. In 2017, many of the problems afflicting the English game, from the lack of young English players in the top flight to the feeling of disenchantment some have with the cost of watching the game, would seem soluble if the interests of the game’s governing body were aligned with that of its most valuable asset.

In 1991, however, the FA was not looking over the horizon. It was worried about a newly aggressive Football League. Spurred by the threat of the 1988 breakaway, the League had produced a manifesto, One Game, One Team, One Voice, which mooted a holistic approach to the development of all levels of football, with the League at its centre, of course. This was particularly galling for Kelly, who had left the League for the FA just months previously. When the Big Five, through their ambassadors Dein and Liverpool’s Noel White, approached him with the intention to secede once again, they found a receptive audience.

After meeting the pair, Kelly got straight to work. The FA commissioned an executive from Saatchi & Saatchi, Alex Fynn, to imagine how a new league might be organised and the revenues it might generate. Kelly also hired Parry, then a management consultant at Ernst & Young, to act as emissary to the Big Five.

“The first few weeks I was doing the running around and there were regular meetings of the five clubs,” says Parry. These meetings were conducted in secret, though perhaps they could have been more discreet; one with Manchester United’s Martin Edwards was held at a Manchester hotel under the name “Martin and co”. “Against all expectations, the First Division had just gone back from 20 to 22 clubs, which was hardly helpful to the England team. We envisaged a reduction to 18 clubs. David was very keen on it, others much less so, they were conscious of loss of revenue.”

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A reduction to 18 clubs was also part of Fynn’s plan. He had calculated the substantial revenues available from increased TV exposure. Off the back of them he envisaged a restructuring of the entire league system, with an elite division resting on a pyramid of regional competitions. There would be more “event” matches, the England team would benefit and, crucially, the FA would take a significant percentage of any broadcast revenue (up to 40%) to reinvest in the national and grassroots game. In effect, England would become more like Germany. Fynn presented his plan to the FA’s board full of optimism.

By the time the FA announced plans for a breakaway league on 5 April 1991, only a desire to reduce the division to 18 clubs remained. The new league had become simply a transfer of power, from the Football League to the FA. The League immediately began legal proceedings. It also observed that all clubs registered in the League needed to serve a notice period of three years before quitting; a potentially fatal clause because clubs would have to resign not knowing if, by the time the breakaway eventually arrived, they would even be in it or not.

Still, plans for the competition, now known as the Premier League (the title having been adjudged less confrontational than the original “Super League”) pushed relentlessly onwards. With more and more clubs interested, a meeting was convened with the FA to discuss the fine print. It was to be a fateful meeting.

Dein describes the encounter as “probably a missed opportunity”. Held at the FA’s Lancaster Gate offices, it was conducted by the FA’s chairman, Sir Bert Millichip, later to be dubbed by Brian Glanville as Bert the Inert. His counterparts were a gaggle of football chairmen desperate to take control of their own destiny. The agenda soon turned to the reduction to 18 clubs. Some of the smaller teams, worried about being excluded, wanted to know if this was mandatory. Sir Bert shrugged his shoulders and said: “It’s your league, you decide.”

“I was looking at Graham and thinking: ‘Hang on, isn’t that pretty fundamental?’,” says Parry of the moment the FA ceded control of the direction of English football. “It took me by surprise, I think it took everybody by surprise. He was referring to the 18 clubs, but the message people heard was ‘it’s our league, we’ll make the big decisions’.”

Fynn is more scathing of the way the FA let go of the reins. “They were a poorly run organisation,” he says. “They felt their way of doing things was threatened by the Football League and their first priority was to head that off. In backing breakaway clubs they saw a way to destroy the power of the Football League. All I can say is that they were incompetent and that they had no vision; how could a 42-game league help the England team?”

We knew we had an airplane on the runway ready to take off, but we didn’t know how high it was going to fly

It was an historic moment, the blazers hustled by the suits. For those who have since watched the England team struggle or seen their club fall ever further behind the zenith of the domestic game, with the chance of winning the Premier League not even a dream, it is indeed a sporting tragedy. But at that very moment something miraculous also happened, a piece of administrative genius that would capture another, vastly greater audience. Within minutes of Millichip’s fateful words, the clubs had heard enough. They announced they would design the league among themselves. Millichip, in a further act of anachronistic gentlemanliness, offered them a conference room next door. The clubs took it and appointed Parry, who had been working in a second role for Kelly as ambassador on behalf of the breakaway, to a third job: that of chairman of the putative league.

In that meeting, which lasted less than two hours, the clubs and Parry created the founders’ agreement. It is not legally binding but it has acquired a kind of sanctity, close to that of a religious text. Inside were two simple changes that were to prove incredibly profound. The first was that, within the Premier League, everything would be voted on by the clubs, every club would have one vote, and every vote would require a two-thirds majority to pass. There would be no committees or sub-committees. Secondly, at the behest of the smaller clubs, all TV revenue would be split in a new way. The Premier League would no longer share its money with the lower divisions. But neither would the Big Five take a share commensurate to their size. All money would be divided 50-25-25. 50% was to be split equally between the clubs, 25% according to the league position achieved in the previous season and only 25% dependent on the number of times a club appeared on TV. (A footnote: any international TV revenues, which then were nigh-on zero, were to be divided equally.)

Soon The Premier League announced itself as a legal entity separate from the FA. It may have ditched first the Football League, then the FA before it had even come into existence, but it had also created a framework that would not have been possible under either. By streamlining its governance, the Premier League was more agile than its predecessors. By altering the TV formula, each club had a stake in making it work. This would not have been possible under either. It was one ideally suited to a new era, in which television would become the most important way to consume the sport, and where that sport would be less a competition between domestic tribes and more an internationalised branch of the entertainment industry.

According to Dein: “To make an omelette you need to break some eggs and we broke a lot of eggs at the time. We were forming a new legal entity, rebranding ourselves with a far improved voting structure where we could be master of our own destiny. We had the opportunity to drive the game forward for the benefit of all stakeholders. We knew we had an airplane on the runway ready to take off, but we didn’t know how high it was going to fly.”

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The Football League went on to lose its case in the High Court. The clubs tendered their resignation and Parry physically handed 22 letters to the League at its base in Lytham St Annes. “They invited me in and gave me a cup of tea,” he says. “They were nice people.” The clubs were bought out of their notice period, with the FA bizarrely offering to foot the bill. A deal brokering relegation and promotion with the League was also agreed. The Premier League, ultimately to be comprised of 20 teams, was set to launch in August 1992. Now all this broadcast-friendly creation needed was to make sure it got on to TV.

Waiting, ready to return to the centre of the story, was Greg Dyke. The idea conceived in Suntory had come to fruition; the Big Five could now sign a new, lucrative deal with ITV without having to pass a share of the money down the leagues. But there were two complications: first, under the new League’s constitution, Crystal Palace and Chelsea had as much clout as Spurs or Everton and they resented Dyke for the way the previous deal had been arranged; second, and the significance of this change should hardly need stating, Rupert Murdoch’s BSkyB was now an interested party. While Dyke re-established contact with the Big Five, Murdoch went to work on Parry.

While others would later be flown to private islands, Parry had to make do with a trip to Sky’s payments processing centre in Livingston. The company at that time was mired in debts of more than £2bn but, flattered as he may have been, Parry saw the potential to build a partnership that ran deeper than one game a week on a Sunday afternoon.

“The relationship with Sky is one of the key reasons for the success of the Premier League,” Parry says. “Look at the energy they’ve put into growing the game and promoting it. [Former Sky chief executive] Sam Chisholm memorably said it was the greatest corporate romance of all time.”

Get your arse here and blow them out of the water

ITV thought they were in the driving seat. Trevor East, then Dyke’s deputy and later to become head of Sky Sports, believed he and Parry had come to an understanding while watching Nigel Benn fight Hector Abel Lescano in December 1991. But Parry denied this had happened. By 18 May 1992, however, at the meeting where the Premier League were to select a TV partner, only one bid was up for voting on and that was Sky’s. What happened that day slipped into Premier League folklore almost immediately. East had arrived early at the Royal Lancaster Hotel with envelopes under his arm. A deadline for bids had been set for the previous midnight, but East chose to ignore it. He presented the clubs with a proposal that would yield £262m over five years for 30 live games a season. When Parry found out he immediately called Chisholm, who woke up Murdoch in New York, who authorised another bid.

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Less effective, but certainly as dramatic, was the performance of Alan Sugar. Along with Terry Venables, Sugar had recently acquired control of Spurs. He also had a deal to manufacture Sky’s satellite dishes. With Venables suddenly called from the meeting, Sugar held Spurs’ once solid ITV vote in his hands. After seeing East’s revised bid he tore into the lobby of the hotel, got Chisholm on the phone and demanded he “get your fucking arse round here and blow them out of the water”. Dyke says: “We said: ‘Who are you speaking to?’ and he said: ‘I’m talking to my girlfriend!’” Parry recalls: “Sam was saying to him: ‘Get off the bloody phone, I’m trying to get this thing sorted!’”

Sky came back with a vastly improved deal worth £42m more over the five years than ITV were willing to pay. They would show 60 games a season and promised a return for Match of the Day, with the BBC paying for highlights. This was the deal that was put to Premier League clubs. It was passed 14 to 6.

Dyke is now phlegmatic about the decision. “I was a bit naive, because it was always going to end up on pay TV at some stage,” he says. “If we’d have won you’d just have had a single Sunday afternoon game like we’d done the previous four years. We might have won it that time but in the end pay TV would have won out.”

Such were Sky’s debts that, had they lost, they might not even have been in business by the time the next negotiation came along. But they won. On 16 August 1992 Richard Keys presented the first Super Sunday, Nottingham Forest versus Liverpool. The Premier League era had begun.

• This article was amended on 24 July 2017 to remove a quote from Greg Dyke that said Rick Parry had been flown up to meet Rupert Murdoch in person.